Leaseback – APR versus Interest Rate?

In a leaseback, why look at an APR versus an Interest Rate?

The reason is that in a leaseback, the full payment  is typically fully tax deductible, allowing for a significantly lower APR cost of money versus the interest rate.  As an example, below:

The approximate cost of financing for $33,500 as follows: The Lease may be written off 100% and return $12,711 in Tax Savings as follows:
60 X $962.98 + Tax=$57,778.   $57,778 @100% write-off in a 22% tax bracket (National Average =28%)=$12,711
Your business can Recover:
$57,778 – $33,500 funding – $12,711 Tax Savings=$11,567 Total cost not recovered.   $11,567 % 5=$2,313/Year.  $2,313/33,500=6.9% effective lease APR cost of money.  $2,313/12=$193/Mo.

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In business, dollars invested wisely can generate revenues many times the investment and interest paid, and the $193 per month becomes almost irrelevant considering the revenue the investment generates.

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